Just weeks after having announced an option to acquire a project from WAMA, Volcanic Gold Mines (VG.V) has now entered into another option agreement to acquire an initial 70% stake in the Seimana gold project in Guinea. This initial interest could be increased to 100% (which will result in an effective ownership of 80% as the government of Guinea will retain the right to have a 20% stake in any gold property).
Volcanic will make a cash payment of US$17,640, complete US$700,000 in exploration expenditures within the first 18 months after acquiring the property to earn the initial 70% stake. Volcanic could then continue to work on the property and the next US$2M will have to come out of its pockets as well and it’s only after the total $2.7M in expenses on the property the minority owners will have to contribute. If they can come up with the cash, the joint venture will remain a 70/30 deal, but from then on, the minority owners could be diluted down.
The Seimana property looks quite intriguing, as a previous owner has completed 3,000 meters of drilling in 31 (shallow) holes. With 10 meters at 2.58 g/t gold, 4 meters at 19.8 g/t gold and 3 meters at 5.6 g/t gold, the Seimana property definitely has a lot of potential. As the property has been subject to artisanal mining activities, Volcanic Gold can now easily define the trend of the gold occurrences, and we expect the company to earn a lot of meaningful insight with the $0.7-2.7M in exploration expenditures.